CF Industries has positive outlook for fertilizer use in 2013 crops

11 June 2013 20:53[Source: ICIS news]

HOUSTON (ICIS)--Despite a weather-hindered start to the 2013 growing season, the outlook remains positive for yields and applications of crop nutrients, US fertilizer maker CF Industries said on Tuesday.

Unlike the farmers who have benefitted from the boom in commodities, Illinois-based CF said it would not like to see another return to peak pricing as experienced in 2012. High crop income levels can be maintained without squeezing demand from the various industries that rely on the essential grain, company officials said at CF's investors day conference.

CF executives said that although the US Department of Agriculture (USDA) has forecasted 97m acres will be planted this year, the company’s estimate has been trimmed to 96m for 2013 and lower in the coming years. CF has calculated that corn will return to a $5/bushel level by 2014.

“Farm income will remain very high and crop returns will continue to favour corn over soybeans, and we should see 92-plus million acres going forward as we look out for the next three years,” said Doug Hoadley, CF's agri-business analysis director.

“With that kind of price level, we also see the users of corn -- whether ethanol, livestock producers or exports -- with a strong recovery in 2013 and growth continuing through 2016," he added.

CF would like to see farmers avoid another drought which sapped yields, causing an average yield of 123 bushels compared to the 150-155 bushels forecasted for this year by agricultural analysts, Hoadley said.

Harking back to the weather issue, he said that the biggest unknown factor in corn production this year will be the weather in July. There are concerns a quick onset of summer heat could lead to issues with pollination of the corn and decrease yield potential.

“If you look back at the last decade, we started off at about $2/bushel and then we saw the ethanol boom, but it just wasn’t ethanol. It was that exports were increasing, and we saw a strong increase for most demand and that led to higher prices in the $4-5 range. Over the last year we saw the drought that occurred in the Corn Belt and took yields down to 123 bushels/acre, and that got prices up to $7,” Hoadley said.

“We don’t actually like that," he added. "I know farmers do, and it looks good on paper, but it results in large decline in demand.”

CF is forecasting the average price this year at $5.60/bushel for corn and $12.80/bushel for soybeans, and the company expects corn stocks to increase moderately this year. While the USDA is at 158 bushels/acre as its basis, CF has estimated 155 bushels. If yields were to fall further than those ranges, it would leave corn stocks still tight at year’s end.

“It is one of the coldest springs on record and it certainly is Iowa, Wisconsin, [the] Northern Illinois area and all the way up to the Dakotas and Minnesota, and it has been a very wet season, so it is hard to judge where the acres are going to be right now,” Hoadley said.

For CF, the upside is that fertilizer application will remain steady, if not consistently increasing in the future, especially when the return on value is considered with rising farm revenues, he said.

“It really is going to depend on what the corn yield is -- probably you are looking closer to 94, 95 million [acres planted] even for next year," Hoadley said. "When you put those kinds of numbers through for corn plantings, nitrogen demand remains at pretty high levels."